Exam 6: Measuring the Cost of Living

Table 6-1 -Refer to the Table 6-1.Suppose that the typical consumer basket consists of 5 bushels of peaches and 10 bushels of pecans and that the base year is 2014.What is the consumer price index for 2015?

Which agency calculates the CPI?

Which statement best describes nominal interest rates and real interest rates in the 1970s and 1990s?

If the consumer price index was 100 in the base year and 114 the following year,what was the inflation rate?

Which of the following best describes real interest rates in the 1970s and 1990s?

What do economists believe about the bias in the CPI as a measure of the cost of living?

The CPI for 2015 is computed as 100 times the ratio of the price of the market basket in 2015 divided by the price of the market basket in the base year.

The following table shows the consumption categories used to compute the consumer price index in a hypothetical economy,their weights as percentages in a typical consumer's total expenditure,and the price ratios relative to the base year. a)Calculate the consumer price index in Year 1 and Year 2. b)Calculate the inflation rate in Year 1 and Year 2. c)Explain how the weights in column 2 were determined.Discuss the meaning of "Price of food."

Andrew is offered a job in Calgary where the CPI is 130 and a job in Toronto where the CPI is 180.Andrew's job offer in Calgary is for $65,000.Which salary would the Toronto job have to pay so that both jobs have the same purchasing power?

What does "substitution bias" in the consumer price index refer to?

The market basket used to calculate the CPI in Aquilonia is: four loaves of bread Six litres of milk, Two shirts,and Two pairs of pants. Last year, The price of bread was $1.00 per loaf, The price of milk was $1.50 per litre, The price of a shirt was $6.00,and The price of a pair of pants was $10.00. This year, The price of bread is $1.50 per loaf, The price of milk is $2.00 per litre, The price of a shirt is $7.50,and The price of a pair of pants is $13.00. What is the inflation rate,as measured by the CPI,for Aquilonia between last year and this year?

Since it accounts for changes in the prices of imports and the GDP deflator does not,the CPI is based on more goods and services than the GDP deflator.

In sequence,what are the steps involved in calculating the consumer price index and the inflation rate?

Because the CPI is based on a fixed basket of goods,the introduction of new goods and services in the economy causes the CPI to overestimate the cost of living.Why is this?

In Canada,if the price of imported oil rises so that the price of gasoline and heating oil rise,what happens to the GDP deflator and the consumer price index?

Table 6-4 This table shows the CPI for various categories of goods and services. -Refer to the Table 6-4.Among these categories,what was the highest rate of inflation?

What does the real interest rate tell you?

What does the nominal interest rate tell you?

You know that a chocolate bar cost five cents in 1962.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in today's prices?

When the relative price of a good increases,how will consumers respond?